ASSOCIATION OF OREGON CORRECTIONS EMPLOYEES and OREGON DEPARTMENT OF ADMINISTRATIVE SERVICES on behalf of the OREGON DEPARTMENT OF CORRECTIONS. IA-18-01.

INTRODUCTION

This matter of interest arbitration is before Ronald L. Miller pursuant to ORS 243.746. The arbitration hearing was held on March 7 and 8, 2002 in Salem, Oregon. Mr. Daryl S. Garrettson represented the Association of Oregon Correction Employees (Association). Mr. Stephen D. Krohn represented the State of Oregon (Employer).

Neither party issued any challenge to the substantive arbitrability of the dispute. The hearing proceeded in an orderly manner without objection from either party with regard to relevant administrative rules for conducting such hearings. There was a full opportunity for the parties to submit evidence, to examine and cross-examine witnesses, and to argue the matter. All witnesses testified under oath as administered by the arbitrator. The arbitrator tape-recorded the proceeding as an extension of his personal notes. The tape recording of the proceeding made by the Employer will be retained by the arbitrator in accordance with relevant administrative rules.

The parties submitted the matter to the arbitrator on the basis of evidence presented at the hearing as well as post-hearing briefs. The arbitrator officially closed the hearing on May 1, 2002 after timely receipt of post-hearing briefs.

STATUTORY CRITERIA

In arriving at a decision in this matter, the arbitrator weighed and considered, where applicable, the following criteria set forth in the Oregon Public Employees Collective Bargaining Act.

ORS 243.746(4)

Where there is no agreement between the parties, or where there is an agreement but the parties have begun negotiations or discussions looking to a new agreement or amendment of the existing agreement, unresolved mandatory subjects submitted to the arbitrator in the parties' last best offer packages shall be decided by the arbitrator. Arbitrators shall base their findings and opinions on these criteria giving first priority to paragraph (a) of this subsection and secondary priority to subsections (b) to (h) of this subsection as follows:

(a) The interest and welfare of the public.

(b) The reasonable financial ability of the unit of government to meet the costs of the proposed contract giving due consideration and weight to the other services, provided by, and other priorities of, the unit of government as determined by the governing body. A reasonable operating reserve against future contingencies, which does not include funds in contemplation of settlement of the labor dispute, shall not be considered as available toward a settlement.

(c) The ability of the unit of government to attract and retain qualified personnel at the wage and benefit levels provided.

(d) The overall compensation presently received by the employees, including direct wage compensation, vacations, holidays and other paid excused time, pensions, insurance, benefits, and all other direct or indirect monetary benefits received.

(e) Comparisons of the overall compensation of other employees performing similar services with the same or other employees in comparable communities. As used in this subsection, "comparable" is limited to communities of the same or nearest population range within Oregon. Notwithstanding the provisions of the subsection, the following additional definitions of "comparable" apply in the situations described as follows:

(A) For any city with a population of more than 325,000, "comparable" includes comparison to out-of-state cities of the same or similar size;

(B) For counties with a population of more than 400,000, "comparable" includes comparison to out-of-state counties of the same or similar size; and

(C) For the State of Oregon, "comparable" includes comparison to other states.

(f) The CPI-All Cities Index, commonly known as the cost of living.

(g) The stipulations of the parties.

(h) Such other factors, consistent with subsections (a) to (g) of this section as are traditionally taken into consideration in the determination of wages, hours, and other terms and conditions of employment. However, the arbitrator shall not use such other factors, if in the judgment of the arbitrator, the factors in subsection (a) to (g) of this section provide sufficient evidence for an award.

BACKGROUND

The Association (AOCE) represents employees in the correctional officer series (corrections officer, corporal, sergeant) at four institutions run by the Department of Corrections (DOC): the Oregon State Penitentiary, the Oregon State Correctional Institute, the Mill Creek Correctional Institution, and the South Fork Forest Camp. All the institutions except the South Fork Forest Camp are located in the Salem metropolitan area. The South Fork Forest Camp is located in rural Tillamook County. The Association also represents non-correctional officer series employees at the same institutions except the Oregon State Correctional Institute. These institutions include a range of security levels, from maximum security at the State Penitentiary to a minimum security work camp at South Fork Forest. The Association represents a total of 640 employees at the four institutions.

The Department of Corrections operates a number of other facilities where employees are represented by the American Federation of State, County and Municipal Employees (AFSCME). A large majority of the AFSCME represented employees work at four institutions located in eastern Oregon.

LAST BEST OFFERS

Both last best offer packages contain numerous proposed changes. To facilitate this analysis, the changes are organized in four groups.

The statutory criteria mandate that the arbitrator look first at (a) "the interest and welfare of the public," and to utilize secondary criteria (b through h) only if the interest and welfare of the public does not control the decision. The problem with this approach, as noted by many arbitrators, is that the interest and welfare of the public is such a vague phrase and so fraught with competing interpretations, that arbitrators have almost unanimously concluded that the interest and welfare of the public can only be determined by reviewing the secondary criteria. In Association of Oregon Corrections Employees (IA-13-95, 1996), Arbitrator William Bethke commented, "The problem is not that the concept of interest and welfare of the public is unimportant. To the contrary, it is vitally important. It is also extremely general and inherently debatable."

The Association and the Employer submitted last best offer packages that have well-reasoned features and are based in evidence. Nevertheless, neither package convincingly established that "the interest and welfare of the public" can be determined by the arbitrator without consideration of the secondary criteria. Therefore, the following analysis applies the secondary criteria to the last best offers of the Association and Employer.

Salary Schedule (Article 10, Section 2)

Salary adjustments are by far the most significant component of both party's last best offer packages, in dollar amount and in terms of applying controversial statutory criteria to state employees.

Criterion (b): Reasonable Ability to Pay

In assessing the "reasonable" financial ability of the public employer to cover costs of a proposed contract, the legislature instructed interest arbitrators to "give due consideration and weight to the other services provided by, and other priorities of, the unit of government, as determined by the governing body." Although the arbitrator is charged to give consideration and weight to the services and priorities as determined by the governing body, the governing body does not have unfettered discretion regarding its financial priorities and services. The arbitrator must determine what is reasonable. In Bend Firefighters Association and City of Bend (IA-09-95, 1996), Arbitrator Carlton Snow reasoned, "A fixed budget does not provide an impossible barrier to funding economic proposals. Otherwise an employer's self-imposed budget would be able to eviscerate statutorily mandated collective bargaining." Furthermore, relative ability to pay is but one of a group of secondary criteria; the legislature did not designate it first among equals.

If raised as a defense, an employer has the burden to convincingly establish its relative inability to pay. The degree of confidence an employer can create for its financial projections is an important factor. This confidence factor is also important in cases, as here, where the Association projects better times ahead. Given the experiences many interest arbitrators have had with employer forecasts of untoward consequences that never materialized, arbitrators typically consider claims of inability to pay with a healthy skepticism. However, for the State of Oregon, the wolf is really at the door.

The Employer argues that its proposals for salary increases are within its "reasonable" financial ability to pay: 2.5 percent and 3 percent for correctional officers, 2 percent and 3 percent for non-correctional officers, on July 1 of each fiscal year of the current biennium. Evidence of record clearly documents the dire condition of the State's economy and the State of Oregon's substantial revenue losses. As a result, cutbacks in employment among State employees, including the Department of Corrections, are forecasted. Given these economic conditions, the salary increases proposed by the Employer represent a "reasonable" balance of financial interest between bargaining unit employees and the State of Oregon.

The Association's examination of ability to pay (Association Post-Hearing Brief, page 9) using Arbitrator Timothy Williams' "eight factors" is instructive. The Association acknowledges that the State of Oregon is in a significant financial and fiscal crisis. The Association's salary proposal seeks to accommodate this crisis by scheduling its salary increase during the latter part of the current biennium: 3 percent on September 1, 2002 and a larger, catch-up increase of 7 percent on March 1, 2003.

Clearly, back-loading in the Association salary proposal results in significant savings in operating expenses for the current biennium, an important consideration during this time of financial and fiscal crisis: salary savings of $829,250 according to the Association (Ex. A-19, page 2) or salary savings of $775,536 according to the Employer (Ex. S-34, page 2). Although the back-loading feature produces operational expense savings, as of March 2003 and going into the next biennium, salary rates for AOCE represented employees would be significantly higher than salary rates for DOC employees performing the same duties at other institutions. The Association contends that by mid-2003 the State will have reasonable ability to pay because the current economic downturn will be short in duration and that State will be in a much more secure financial setting. The arguments presented by the Association for an economic turnaround and improved State revenues in the near-term are optimistic.

Criterion (c): Attract and Retain

Central to the Association's contention of a recruitment and retention problem in the bargaining unit is its analysis of persons separated from bargaining unit positions during January 1997 to January 2002 (Ex. A-25). According to the Association, the turnover rate is 51.8 percent for the five years.

The Employer counters that the 51.8 percent figure is misleading because the data on which it is based does not identify the reasons of separations, including retirements, transfers, job change for personal reasons, etc. The Employer argues that it would be in error to link such gross turnover data only with pay dissatisfaction. The Employer did not provide its own more specific analysis of long-term data.

In support of its contention that there is no recruitment and retention problem in the bargaining unit, the Employer examined turnover during calendar year 2001 (Ex. S-43 and Ex. S-44). This analysis indicates there were no voluntary resignations among non-security personnel, and two resignations for economic reasons among security personnel, or 0.4 percent of all security personnel. The Association counters that for the Employer to prove that there is no retention problem, multi-year data is needed but was not provided.

The Employer also argues that tenure data for the bargaining unit indicates a stable workforce (Ex. S-45 and Ex. S-46). Nearly 70 percent of security personnel have five or more years of experience with the Department of Corrections, and over 50 percent of non-security personnel have five or more years of experience with the Department.

Evidence of record (Ex. S-42) suggests an adequate pool of applicants for correctional officer positions. However, the data only includes those persons who successfully completed initial phases of the selection process, not those persons fully qualified for placement.

The Association argues that the Employer should be charged with proving that there is no recruitment and retention problem within the bargaining unit; the Employer is keeper of the data. Normally, in interest arbitration, there is no direct burden of proof. In this case, the employer has not sat on its hands. Although data related to recruitment and retention could be more comprehensive and specific, the Employer provided useful evidence.

The evidence of record does not support the Association's contention that there is a recruitment and retention problem, and therefore, this statutory criterion does not favor the Association's last best offer.

Criteria (d) and (e): Comparisons of Overall Compensation

These criteria go to the heart of controversy in this matter and are examined together. Simply stated, the Association argues that comparable communities used in the examination of overall compensation should consist of two groups: an intra-state group of five Oregon counties with the largest populations and an inter-state group. The Employer rejects the use of intra-state comparables and focuses on inter-state comparables.

There is one centralized unit of government for all corrections institutions, the Department of Corrections; moreover, similar security and non-security positions are found at these institutions. Nevertheless, the Association makes a convincing argument for a distinct community of interest among AOCE bargaining unit employees. With the exception of the small South Fork Forest Camp, the bargaining unit consists of three institutions in close proximity. The bargaining unit is located in an economic region of the state, the mid-Willamette Valley, quite different from the other concentration of DOC institutions in Eastern Oregon. Moreover, 73.8 percent of bargaining unit employees live in Marion County. The AOCE bargaining unit exists within an identifiable local labor market.

Recognizing that the AOCE bargaining unit exists within a local labor market does not, in and of itself, justify the use of intra-state comparables as part of the (4)(e) analysis. The language and composition of subsection (4)(e) are ambiguous concerning the issue of comparable communities for agencies of the State of Oregon. In the (4)(e) context, the words "within Oregon", "Notwithstanding", "additional", and "includes" invite debate. Having read the state-level awards of Arbitrators William Bethke, Nancy Brown, Philip Kienast, Howell Lankford, Thomas Levak, and Carlton Snow, and studied the record and post-hearing briefs, it is my interpretation of subsection (4)(e) that for the purpose of this subsection, the legislature intended that cities be compared with cities, counties be compared with counties, and states be compared with states.

However, comparison of state overall compensation with city or county overall compensation should not be neglected. For some state employees, relevant local labor markets exist and should be taken into consideration in an assessment of overall compensation. If a case can be made for a relevant local labor market, as AOCE has done is this matter, then consideration should be given to comparative overall compensation data as part of a (4)(h) analysis. An advantage of using (4)(h) for intra-state labor market analysis is that the analysis is not encumbered by having to only apply the "same or nearest population range" factor of (4)(e). Rather, all appropriate factors that define a labor market can be addressed. County-state comparables for the AOCE bargaining unit are addressed later in the (4)(h) subsection.

Turning to inter-state comparables, subsection (4)(e)(C) does not mandate benchmarks, such as "same or nearest population," for state to state comparisons. The parties are not limited to the surrounding states of California, Nevada, Idaho, and Washington. In its proposal, the Association includes Alaska with the four surrounding states. The Employer goes even more far afield to include Connecticut, Iowa, Oklahoma, and South Carolina based on similar state populations. Given differences in economies, costs of living, demographics, collective bargaining legislation, compensation benefits, etc. among the 50 states, the potential for alternative comparable groups is limited only by the degree of creativity.

An analysis of pay and benefits in the comparable state groups provided by the parties leads to one conclusion, regardless of a comparable group's configuration, the Employer is competitive. For example, using the five states proposed by the Association, total compensation for a DOC corrections officer with 10 years of service could be calculated as .06 percent below the five state average (Ex. A-17) or 10.5 percent above the five state average (Employer Post-Hearing Brief, Attached Table). The difference in the figures reflects a long-standing controversy concerning the interpretation of language from subsection (4)(d), "and all other direct or indirect monetary benefits received." Using either method to calculate overall compensation, Employer compensation is near to or above the average for all comparable groups proposed by the Employer and the Association.

Criterion (f): CPI-All Cities Index

The cost of living index specified in law for interest arbitration is CPI-All Cities. That index shows that during the life of this bargaining unit, the cost of living increased 23 percent. Compensation for a corrections officer, at the top step, increased 36.8 percent; here, compensation includes wages, pension pickup by the Employer, and the Employer's contribution for employee insurance. This calculation of compensation is based upon the language of subsection (4)(d):

The overall compensation presently received by the employees, including direct wage compensation, vacations, holidays and other paid excused time, pensions, insurance, benefits, and all other direct or indirect monetary benefits received.

During the recent 12 months period (April 2001-2002), the CPI-All Cities index increased 1.6 percent. Unless there is an unanticipated, large spike in inflation during the contract period, either the Association's or the Employer's proposed salary increases should more than cover increases in the CPI-All Cities index.

Criterion (h): Other Factors

In the judgment of the arbitrator, the award in this matter cannot be decided solely on the basis of the factors in subsections (4)(a) through (f). Two issues raised by the parties are properly considered under (4)(h). First, the Association argues for an intra-state labor market component in comparative pay analysis. Second, the Employer argues that internal compensation parity is necessary among all its institutions. The two issues are consistent with subject content of subsections (a) through (f). Moreover, both issues are traditionally taken into consideration during contract negotiations in determining wages, hours, and other terms and conditions of employment, and have an impact on the interest and welfare of the public.

Local Labor Market

In the earlier discussion of criteria (4)(d) and (e), comparison of DOC overall compensation with communities "within Oregon" was found not to be sanctioned by subsection (4)(e). Nevertheless, the Association has made a convincing argument for a distinct community of interest among employees of the AOCE bargaining unit within a local intra-state labor market. Dimensions of that local labor market need to be identified. The language of (4)(e), "same or nearest population range" is not controlling in defining a relevant labor market under (4)(h). Furthermore, the evidence of record does not support a relevant labor market running along the I-5 corridor from Multnomah County through Lane County. The Association's own exhibit (Ex. A-13) indicates that 73.8 percent of AOCE employees live in one county, Marion. Although there is no evidence on the point, it is fair to assume that unit employees who do not live in Marion County reside in nearby counties: Linn, Benton, Polk, Yamhill, Washington, or Clackamas. Accordingly, the relevant labor market for the AOCE bargaining unit is Marion County, with consideration given to surrounding counties.

Marion County employs deputies and correctional officers in separate job classifications, includes deputies and correctional officers in the same bargaining unit, and pays both classifications the same salary. Association exhibit A-15A, page 2, indicates that at the ten year service level, a Marion County correctional officer's total compensation is $4,818.55; a similarly situated AOCE correctional officer's total compensation is $3,760.34. The difference in compensation is $1,058 or 28 percent.

Among the surrounding counties, evidence of record is only available for Clackamas County; again, deputies and correctional officers are in the same bargaining unit, there are separate job classifications, and the two classifications are paid the same salary. The disparity in compensation between county and state correctional officers is even greater here; $5,001.64 in Clackamas County and $3,760.34 in the AOCE unit, for a $1,241.30 or 33 percent difference. Comparative data for other surrounding counties would be useful in assessing this local labor market.

Internal Compensation Parity

"The interest and welfare of the public" is determined by reviewing the secondary criteria, among them, subpart (h). Compensation parity within the Department of Corrections is an aspect of efficient state government operations, and therefore, directly related to the interest and welfare of the public. Internal compensation parity is properly an issue for consideration under subpart (h). Disparity in compensation among DOC employees doing the same work creates the potential for a multitude of problems involving employees at different correctional institutions, their unions (AOCE and AFSCME), and the Department of Corrections. Accordingly, for persons performing the same duties for the same employer, disparity in pay requires substantial justification.

There is no dispute that DOC employees perform identical services throughout the various institutions in terms of basic correctional oversight of prisoners. Moreover, for the last eight years, the Employer has maintained compensation parity between the AOCE bargaining unit and the AFSCME bargaining unit, including the amount and timing of changes in pay. Prior to this round of negotiations, DOC and AOCE set the pattern for compensation changes and AFSCME followed the pattern. This year, roles are reversed; DOC first settled with AFSCME. DOC's last best offer package includes salary changes contained in the AFSCME -DOC Agreement.

While a practice of compensation parity is not determinative, departure from such a practice should be sanctioned only for substantial persuasive reasons. An interest arbitrator should exercise prudent reluctance to upset established practices of compensation parity among persons performing the same duties for the same employer at different locations.
Other Pay Provisions

In the analysis of the following issues, the arbitrator weighed and considered, where applicable, the statutory criteria.

Non-Correctional Officer Security Points

The essential difference in the Association's proposal Article 10, Section 2 and the Employer's Article 13, Section 6 is the monetary value of a point; the Association proposes $12, the Employer $10.70. As with its proposal for salary changes, the Employer links its proposal to the same dollar amount for this purpose in the AFSCME bargaining unit. Although the Association bridles at "me tooism," it presents no justification for the $12 amount. The Employer's proposal and rationale are persuasive.

Shift Differentials

The arguments made by the Association for changing the time period, and by the Employer for retaining the current time period, are reasonable. Neither party prevails on this issue.

DPSST and TERT Differentials

The Association's proposal would expand the payment of these differentials to employees who do not use the certifications in their duties. The Association is not persuasive in support of its proposal.

TERT Team Premium

Based upon training, assigned duties, and institutional safety, the Association's proposal to extend the TERT premium to Hostage Negotiators and STG employees is persuasive.

SFFC Premium

Data on recruitment and retention of employees at the South Fork Forest Camp does not support the need for a 5 percent premium for employment at that institution. The Association's proposal is not persuasive.

Variable Relief/ISD

There appears to be no significant differences in the substance of the Association's and Employer's proposals on this issue. Neither party prevails on the issue.

Dedicated Service Pay

The Association's proposal for a 2.5 percent pay increase at 15 years of service is not supported by evidence that the Employer has a problem retaining senior employees. The Employer counters that the 6 percent differential for DPSST advanced certification more appropriately links a salary increase with demonstrated improvement. The Association's proposal is not persuasive.

Hazardous Response Team

Because employees receive specialized training of value to the Employer, and may be called upon, individually or collectively, to respond in an emergency, a premium pay differential is fair and appropriate. The Association's proposal is persuasive.

Language

In the analysis of the following issues, the arbitrator weighed and considered, where applicable, the statutory criteria.

Non-Corrections Officer Security Review Committee

The main concerns of the Employer with the Association's proposal for a review committee are that equal participation on the committee by Association and Employer representatives assures tie votes, gridlock, and lack of compromise. Certainly some joint committees are dysfunctional, however, many are not. The Association's proposal provides an appropriate mechanism for applying security points to AOCE bargaining unit positions. The Association's proposal is persuasive.

Remove requirement for Subpoena

Reliance upon a subpoena for paid absence is a prudent precaution; a subpoena provides a measure of assurance that attendance of a DOC employee is necessary, and the subpoena is usually served with sufficient lead time for the Employer to arrange replacement. The Association's proposal is not persuasive.

Compensation Following Injury

The Association's and Employer's proposals each contain worthwhile components; however, neither is sufficiently persuasive. The inclusiveness of the Association's proposal, applicable for all injuries subject to the Oregon Workers' Compensation Act, is especially troublesome. An injury suffered by an employee might not be related to any contact with an inmate. The arbitrator does not have the option to blend the best of both proposals.

Non-Discrimination Language

The Association has not provided sufficient justification for including additional non-discrimination language in the contract. The Association's proposal is not persuasive.

Notice of Promotional Interviews

Little justification was provided for the Employer's proposal to limit notices to corporal and sergeant positions. There is no evidence that the current procedure creates an undue administrative burden. The Employer's proposal is not persuasive.

Security and Self-Defense Training

The Employer annually provides one-week, 40 hours, of in-service training. If implemented, the Association's proposal for 40 hours of "security and self-defense related training" would either supplant a portion of or all the training priorities determined by the Employer, or require the Employer to schedule additional paid training beyond the current 40 hours per year. Moreover, there is no evidence of record that the proposed training requirement is based on an unmet need among "all employees who come into direct contact with inmates." Use of existing procedures to establish training priorities is preferable to a contract mandate. The Association's proposal is not persuasive.

CONCLUSION

Careful consideration has been given to the issues grouped under "Other Pay Provisions" and "Language". Nevertheless, individually or collectively, those issues are not determinative in this matter. The award is based primarily upon application of statutory criteria to salary related changes proposed by the parties.

Because of its back-loading feature, the Association's salary proposal saves the State of Oregon money during this biennium and assists the State in the current financial crisis. During the near-term, the Association's salary proposal promotes the "reasonable financial ability" of the DOC "to meet the costs of the proposed contract." This aspect of the proposal is consistent with the intent of (4)(b). However, there are other aspects and consequences of the Association's salary proposal. During the term of the contract, salaries paid to AOCE bargaining unit employees fluctuate compared to other DOC employees who perform the same duties: first AOCE unit salaries fall below, then by March 2003, move ahead. Furthermore, because of the proposed 7 percent "catch-up" increase in March 2003, the DOC and AOCE would enter the next biennium with a significantly higher salary cost structure than would be the case under the Employer's salary proposal. If the State's financial crisis continues into the next biennium, as appears likely, the Association's salary proposal would have a detrimental impact on DOC and the State's "reasonable ability to pay." From a short-term perspective, criteria (4)(b) favors the Association's proposal. However, from a longer perspective, by early 2003 and into the next biennium, criteria (4)(b) favors the Employer's proposal. Within the confines of the current biennium, this criteria supports selection of the Association's last best offer package.

Under (4)(h), the Association has made a convincing argument for a distinct community of interest among employees in the AOCE bargaining unit. There exists a relevant intra-state labor market, composed of Marion County and surrounding counties. Evidence for Marion County shows that at the ten year service level AOCE bargaining unit correctional officers are paid 28 percent less than the county's correctional officers. Data for the surrounding counties is incomplete; however, comparative data for Clackamas County also shows a similar disparity in compensation between correctional officer job classifications. By the end of the contract period, AOCE bargaining unit salary levels would be higher under the Association's proposal than under the State's proposal. However, because of back-loading in the Association's proposal, during the contract, AOCE unit employees would earn less money under the Association's proposal than under the State's proposal. Depending upon what happens to salaries at the county level, disparity in salary rates and income many not be alleviated by either salary proposal. Nevertheless, on balance, compensation comparisons with a relevant local labor market support the Association's last best offer package.

The Association and Employer propose an assortment of inter-state comparable groups. Data on pay and benefits for these inter-state groups indicates that the Employer's overall compensation is near to or above the average for all comparable groups. Inter-state compensation comparisons support the Employer's last best offer package.

An assessment of (4)(c) poses something of a dilemma. The Association contends that 51.8 percent turnover during the past five years among bargaining unit employees is indicative of a major retention problem. The Employer counters that reasons other than dissatisfaction with pay account for the long-term turnover rate; yet, no specific analysis of long-term data is provided by either party. In support of its contention that there are no recruitment and retention problems within the bargaining unit, the Employer sites a study of turnover during calendar year 2001, the high percentage of security personnel with five or more years of seniority, and an adequate pool of applicants for correctional officer positions. Given the limited data presented by the parties, there is no convincing evidence of recruitment and retention problems within the AOCE bargaining unit. By what amounts to default, this criterion supports the Employer's last best offer package.

Data on changes in the cost of living and compensation increases during an eight year period, and during the most recent contract, shows that AOCE bargaining unit employees kept ahead of inflation. Unless there is an unanticipated, large spike in inflation during the next contract period, either the Association's or the Employer's proposed salary increases should more than cover increases in the CPI-All Cities index. Given the intent of (4)(f), to protect the purchasing power of employee compensation, the more moderate, incremental salary increases proposed of the Employer adequately accomplish that objective. This criterion supports the Employer's last best offer package.

Under (4)(h), the maintenance of internal compensation parity among DOC employees performing the same work at different institutions (inside and outside the AOCE bargaining unit) is properly an issue at interest arbitration. The arbitrator is not persuaded to depart from the practice of compensation parity that has existed for eight years among DOC institutions. This criterion supports the Employer's last best offer package.

Selection between the last best offer packages comes down to two key issues. On the one hand, the Association's salary proposal provides short-term savings in operating expenses. On the other hand, the Employer claims that the Association's salary proposal will disrupt internal compensation parity that has existed for many years and lead to fluctuating salary relationships among DOC employees who perform the same duties at different institutions. The short-term financial savings from the Association's salary proposal would come at the cost of long-term operational and financial problems for AOCE and AFSCME, DOC and all DOC's employees. On balance, the Employer's last best offer package must prevail. The interest and welfare of the public will be served through implementation of the Employer's last best offer package.

AWARD

The last best offer package of the Employer is selected and ordered to be implemented, pursuant to ORS 243.746(5).